Hill’s paper tackles the other side of the coin of the costs of online learning, as he works through the ideal funding system that would promote innovation but strike the right balance with the need for accountability for public funds. The key tenets of his proposed ideal system are that it funds education, not institutions; moves money as students move; pays for unconventional forms of instruction; and withholds funding for ineffective programs without chilling innovation.

His fundamental idea to accomplish this won’t surprise anyone familiar with the school finance debates, but he states it in a simple and eloquent way that is worth quoting:

Every student would have an account that showed what funding from all sources was available for her education, and to what schools and vendors it had been disbursed. Each student’s account would, in a sense, constitute a “backpack” of funding that the student would carry with her to any eligible school or instructional programs in which she enrolls. … If a family decided to rely on one school or instructional provider for all of a child’s education, all of the money would go to that school or provider. However, students might also enroll in courses provided by different organizations, in which case the funds would be divided. Students and families would then be free to shop for the best combination of courses and experiences their backpack funds could cover. Providers would face competition, both on the quality and effectiveness of their services and on cost.

It’s a good idea, too. But Hill’s changes are unlikely to be so simple to deliver. The reason why lies in his up-front analysis, when he writes about why today’s education system is so flawed: “Our system doesn’t fund schools, and certainly doesn’t fund students. It funds district-wide programs, staff positions, and so forth.”

He continues, “Nobody deliberately engineered the system of mutually reinforcing structures. It arose over time starting in the 1950s as courts decided civil rights suits. … Outsiders, observing that U.S. schools have remained about the same despite revolutions in technology and economic life, conclude that education stasis is due to the lack of new ideas. But that is patently false. Individual teachers, principals, and technology innovators are coming up with them all the time—and often put them into small-scale practice. This the system will allow, but it does not allow widespread use of ideas that challenge its core.”

Hill is absolutely correct, and this is certainly problematic for encouraging innovation. But what’s interesting is that this description is not a condition at all unique to education. Nearly every system confronts this same problem over time as its business model matures and solidifies.

The resource-allocation process at work in nearly all of the world’s most-innovative corporations systematically prioritizes only those things that fit their established business model. Any innovative idea that doesn’t fit the needs of the business model is either rejected or reshaped—some might say watered down such that it’s not all that innovative anymore—to fit the company’s established business model. The classic reaction of leaders and managers searching for more innovative ideas is to yell back at the beginning of the “funnel” and ask for more creative ideas—only that’s not where the problem lies.

Sounds like Hill’s description, no?

So how does one solve this problem once it’s entrenched? Imposing a new funding model on top of the existing business typically doesn’t work. Instead management needs to create an autonomous organization that can craft its new business model from scratch as the innovation demands–serious business model innovation.

Given this, I’d be surprised if districts could simply shift to the new funding model Hill describes—and even if that didn’t matter, because this funding is opposed to how they operate today, they will predictably gear up to fight the sort of wholesale change for which Hill advocates.

It’s one of the reasons that I think a more fruitful way forward, at least for now, is to create these new funding models for the online learning entities that are growing—just as Florida did with the Florida Virtual School, for example—and build on the change from there as these disruptive innovations gain share.

Hill’s piece, however, treats the reader to a tour of what the ideal system should be—not how you would move to it per se. This is important of course, but given that, it’s surprising that he is willing to concede so readily that venture capital maybe won’t play an important part in the evolution of the system because of people’s suspicions about profit-seeking enterprises in education. To me, this is a stunning concession for the supposed ideal system designed to scale innovation in education. Hill’s backing of New York City’s iZone or ARPA-ED as the engine to fund this innovation doesn’t make up for it—and ignores completely the start-ups and educational entrepreneurial energy already percolating in places like Silicon Valley.

Finally, Hill discusses the pros and cons of six different ways of crafting a system that strikes the right balance between innovation and accountability. It’s a thoughtful concluding section, although it seems he is least bullish about the pay-for-performance option. His piece would be helped here—as would a couple pieces now in the Fordham series—by some more grounding in the current pay-for-performance funding models developing in the online-learning world in Utah and Florida, which haven’t seemed to be nearly as onerous as he implies they would be.

With all that said, Hill’s piece is a worthwhile and quick read—and should spark more conversation on the ideal funding system to jumpstart a student-centric education system powered by digital learning.